This invention relates to financial indexes and products derived therefrom.
Stock indexes are used to track the performance of a group of stocks. Similarly other types of indexes are known such as those that track performance of other types of financial instruments. Financial products such as index-based mutual funds or index based exchange traded funds (ETFs) allow an investor to invest in a single investment instrument that tracks the performance of an underlying index. One example of an index fund is a Standard & Poor's Depository Receipt (“SPDR”). An SPDR is a type of security known as a portfolio depository receipt (an Exchange Traded Fund), which represents an undivided ownership interest in a portfolio of stocks held by the SPDR Trust. The SPDR Trust holds a portfolio of stocks that is intended to mirror, track, or generally correspond to the price and/or yield performance of the S&P 500 Index. Securities, like SPDRs, trade on a stock exchange, a securities market or an electronic communication network.
Index futures contracts and index options provide other approaches for investors to invest, trade, or hedge based on the performance of an index. An index futures contract is a futures contract on a financial index such as the S&P 500 index, whereas index options are instruments that give the holder the right to receive cash settlements based on changes in the underlying index on which the option is based. A call index option would ordinarily give a payout if the index rises above its strike price, whereas a put index option would give a payout if the index falls, below its strike price.